ESG funds see outflow of ₹590 cr in June quarter
Sustainable investment funds in India are experiencing persistent capital outflows, leading to stagnant assets under management. This decline contrasts sharply with the broader mutual fund industry’s growth, indicating that profit-booking and lackluster new launches are hindering sector expansion. The market remains highly concentrated among a few major players, limiting investor choice and potentially reducing the competitive pressure necessary to drive genuine sustainability improvements across the industry. Despite low asset growth, the regulatory framework designed to combat greenwashing is becoming more rigorous. SEBI has mandated detailed sustainability disclosures for listed companies and introduced specific categories for sustainable funds, such as exclusion and impact investing. By requiring asset managers to disclose their strategies and the environmental scores of their holdings, regulators aim to create transparency that prevents misleading marketing claims and ensures funds adhere to their stated environmental goals. This regulatory shift is crucial for distinguishing legitimate sustainable investments from superficial ones. As funds are forced to provide reasonable assurance on their core sustainability metrics, the risk of companies or managers exaggerating their green credentials diminishes. Enhanced disclosure norms empower investors to verify the actual environmental impact of their choices, fostering a market where trust is built on verified data rather than vague promises, thereby mitigating the pervasive issue of greenwashing in financial products.
Source: thehindubusinessline.comPublished on 2023-08-17